T. Rowe Price
New America Growth Portfolio
Semiannual Report
June 30, 1999
Dear Investor
The stock market in the first half of 1999 was quite robust. Much like the last
several years, a robust domestic economy led to solid GDP growth, strong
employment, and high consumer confidence. In spite of this exuberance, inflation
continued to be very mild. All of these factors helped the Standard & Poor's 500
Stock Index rise 12.38% during the period. Beginning in April, the market took a
dramatic and quite encouraging turn in favor of a broader list of stocks, and
this benefited your portfolio.
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 6/30/99 6 Months 12 Months
- --------------------------------------------------------------------------------
New America
Growth Portfolio 11.03% 12.37%
S&P 500 12.38 22.76
Lipper Variable Annuity
Underlying Growth
Funds Average 12.62 20.49
The portfolio's excellent gain of 11.03% year-to-date represented a vast
improvement over the previous six-month period, when the global financial
crisis devastated the returns of all but a handful of the largest growth
stocks. Nonetheless, market leadership over the six-month period was still
quite narrow, as it was in 1998, with the largest 10 stocks in the S&P 500
accounting for more than 40% of the index's total gain. The S&P 500's
12.38% gain was nearly double the S&P 400 MidCap Index's return of 6.87%.
Another stunning example of the narrowness of the market is that, as of the
end of March, 80% of all stocks were lagging the S&P 500 Index by more than
15 percentage points over the previous 12 months. By June, however, the
figure was down to 69%, which may bode well for a continued broadening
trend. New America Growth invests in companies of all sizes seeking the
best relative valuations, and has recently focused on the mid-cap area.
Given the degree of dominance by large-caps over the past 12 months, the
New America Growth Portfolio did not keep pace with the average growth fund
or the unmanaged S&P 500. The portfolio's 12.37% advance for the past year
was solid but below its average annual returns for the past three- and
five-year periods of 19.01% and 24.74%, respectively.
Market Environment
Although we may sound like a broken record, the climate continued to be
excellent for investors in the first half. We are now going on a record
ninth consecutive year of economic expansion. With low inflation, low
unemployment, and still-low interest rates, the stage was set for continued
increases in consumer confidence. As a result, the consumer economy
flourished and overshadowed an industrial economy that was mixed at best.
Furthermore, corporate earnings accelerated since hitting a low of -2.8% in
last year's third quarter. Earnings growth for the companies that make up
the S&P 500 is expected to exceed 15% in the second half of the year.
Stocks were somewhat volatile in the first half, as fears of inflation led
many to speculate that the Federal Reserve would act aggressively to stunt
growth. Long-term interest rates rose above 6% in the second quarter for
the first time in more than a year. However, in spite of the vigor in the
economy, signs of inflation were not that strong and the central bank chose
a moderate course. The Fed raised the federal funds target rate just 25
basis points (100 basis points equal one percentage point) and promptly
adopted a neutral stance toward future hikes. In spite of low unemployment,
wage growth has not accelerated and strong productivity gains appear to
have mitigated much of that growth.
Although cyclical and value stocks advanced late in the period, growth
stocks still performed well in the first half, and, among mid-size
companies, growth continued to outperform value. Many cyclical companies
saw their results hurt by the problems in Asia, and investors are seeking
out companies whose growth prospects are relatively immune to slowdowns in
foreign economies. This has increased investor interest in the types of
businesses New America focuses on-domestic, non-cyclical service-based
companies.
The Internet mania that has swept mainstream America cannot be ignored.
Surely, the Internet is the one of the most important developments in
recent history. However, many Internet stocks have risen to valuations that
defy logic. An unmanaged Internet index of 20 stocks surged 52% in the
first half and more than 290% in the past 18 months, compared with the S&P
500's nearly 42% rise in the longer period. We have invested in several
companies that will benefit greatly from the Internet, but have tended to
stay away from many of the pure-play Internet stocks as the valuations are
too extreme. We certainly want to be exposed to the Internet and its great
growth prospects, but we will continue to be judicious with our entry
points (that is, purchase prices). We firmly believe that any stock's
valuation is a function of the future cash flows that the business will
deliver. Buying companies just because they are generating a lot of
revenues will be a poor strategy unless the companies are expected to
generate significant cash flow in the future. Our focus is on finding the
stocks that will generate that cash flow and then finding the appropriate
entry point.
Portfolio Review
Each major sector had positive contributors to the fund in the first half,
though consumer-related and media and telecommunications stocks tended to
perform best as a strong economy paved the way for solid earnings growth.
Five of the top 10 companies were in media and telecommunications. The top
performer was Circuit City Stores, which benefited from both a strong
consumer economy and new digital product cycles. Western Wireless, which
split into two companies-Western Wireless and VoiceStream Wireless-was the
next best contributor during the six-month period. Western Wireless is a
leading rural provider of wireless telecommunications services, while
VoiceStream is a faster-growing PCS operator in major markets. AT&T Liberty
Media, AirTouch Communications, Comcast, and MCI WorldCom were other media
and telecommunications names that performed well in the period. First Data,
the world's largest credit card processor, benefited as well from the
strong consumer economy.
Sector Diversification
---------------------------------------------------------------------------
6/30/98 12/31/98 6/30/99
---------------------------------------------------------------------------
Financial Services 15.9% 15.3% 14.6%
Consumer Services 35.8 39.2 35.8
Business Services 44.0 44.8 47.9
Reserves 4.3 0.7 1.7
---------------------------------------------------------------------------
Total 100% 100% 100%
Health care services was the portfolio's worst-performing industry,
especially Total Renal Care Holdings, the second-largest worldwide provider
of integrated dialysis services for patients suffering from chronic kidney
failure. The stock was weak due to a lack of expense control and an ongoing
investigation into reimbursement issues at a lab business that represents
only about 2% of the company. Omnicare, a leading geriatric pharmacy
company, fell as changes in Medicare reimbursement put pressure on its
customers. Cole National was also disappointing as it miscalculated the
sales environment in its optical business and missed sales targets as a
result.
Changes in sector weightings in the last six months were relatively modest.
Business services continued to grow as a percentage of the fund, but it is
important to note that our additions included stocks in several industries,
such as health care services, computer services, and environmental
services. New holdings included Republic Services, the fourth-largest
provider of nonhazardous solid waste collection and disposal, NOVA, a
credit card processor that focuses on the less-penetrated small and
mid-market businesses, and Equifax, the leading provider of credit
information on consumers. We reduced our consumer services positions
slightly as we trimmed some stocks that had benefited from the strong
economy and eliminated stocks such as AutoZone and Saks.
We remain excited about the fund's holdings. Among our largest are AT&T
Liberty Media, Circuit City Stores, and Vodafone. Liberty Media is a
portfolio of companies positioned to capitalize on the continuing growth of
cable networks. The majority of the company's portfolio is centered around
ownership interests in more than 100 cable networks, such as The Learning
Channel and The Discovery Channel. In addition, Liberty Media boasts
several investments in interactive TV and Internet infrastructure. As
mentioned earlier, Circuit City is right in the middle of a major digital
product cycle for consumers. It will not be too long before DVD players,
high-definition TVs, and digital cameras are commonplace. Our ownership of
Vodafone came through its acquisition of AirTouch. The merger gave us the
best portfolio of international wireless assets and the combined company is
poised for strong subscriber and cash flow growth.
Outlook
The economy continues to look healthy, and the global environment looks
much better than even six months ago. That said, many of the top 50 names
in the S&P 500 remain very expensive on a relative valuation basis. We
would feel much better about the market if it were to broaden
significantly. Many solid growth businesses are not related to the Internet
and are not among the top 50 S&P 500 stocks, and many of these trade at
quite reasonable valuations and offer tremendous opportunities for growth.
We believe the outlook for the New America Growth Portfolio is favorable.
Most of the companies in the fund are forecasted to grow faster than the
typical S&P 500 stock but trade at lower multiples. In addition, given the
service focus of the portfolio, many of the companies have high levels of
recurring revenues. Such companies are by definition more stable than those
that have to resell their products every day. While we are disappointed
with the fund's relative performance over the past year, we remain excited
about our holdings, which are leaders in their respective industries. We
believe the market will continue to broaden such that these stocks will
better reflect their strong prospects.
We would like to take this opportunity to introduce Marc Baylin to you.
Marc, a business services analyst at T. Rowe Price for six years, has been
a significant part of the portfolio's management team for several years as
a member of its Investment Advisory Committee. He has agreed to take on an
expanded role as executive vice president. In this role, Marc replaces
Brian Berghuis, manager of the T. Rowe Price Mid-Cap Growth Fund, who
served ably as executive vice president of New America Growth for many
years and remains a member of the advisory committee. We are excited about
Marc's greater involvement and confident he will add real value to future
performance.
Respectfully submitted,
John H. Laporte
President and Chairman of the Investment Advisory Committee
Marc Baylin
Executive Vice President
July 21, 1999
Portfolio Highlights
Twenty-Five Largest Holdings
- --------------------------------------------------------------------------------
Percent of
Net Assets
6/30/99
- --------------------------------------------------------------------------------
AT&T Liberty Media 3.2%
Circuit City Stores 2.9
Vodafone 2.6
Outdoor Systems 2.6
MCI WorldCom 2.6
Cendant 2.6
Chancellor Media 2.5
Office Depot 2.5
Waste Management 2.4
Affiliated Computer Services 2.3
Galileo International 2.2
Freddie Mac 2.1
Apollo Group 2.1
Home Depot 2.0
Catalina Marketing 2.0
Comcast 2.0
First Data 1.9
Morgan Stanley Dean Witter 1.9
BISYS Group 1.9
Costco Companies 1.8
Clear Channel Communications 1.8
Associates First Capital 1.8
Outback Steakhouse 1.8
Kroger 1.8
Premier Parks 1.7
- --------------------------------------------------------------------------------
Total 55.0%
- --------------------------------------------------------------------------------
Note: Table excludes reserves.
Portfolio Highlights
Contributions to the Change in Net Asset Value Per Share
- --------------------------------------------------------------------------------
6 Months Ended 6/30/99
TEN BEST CONTRIBUTORS
- --------------------------------------------------------------------------------
Circuit City Stores 38(cents)
Western Wireless 35
AT&T Liberty Media 33
AirTouch Communications *** 29
First Data 18
Outback Steakhouse 18
Comcast 18
MCI WorldCom 16
Morgan Stanley Dean Witter 16
Catalina Marketing 14
- --------------------------------------------------------------------------------
Total 235(cents)
TEN WORST CONTRIBUTORS
- --------------------------------------------------------------------------------
Total Renal Care Holdings -21(cents)
Omnicare * 16
Cole National 11
Service Corp. International ** 11
Allied Waste Industries ** 10
Acxion 9
Office Depot 8
Apollo Group 6
Freddie Mac 6
SunGard Data Systems 6
- --------------------------------------------------------------------------------
Total -104(cents)
12 Months Ended 6/30/99
TEN BEST CONTRIBUTORS
- --------------------------------------------------------------------------------
MCI WorldCom 45(cents)
AirTouch Communications *** 44
AT&T Liberty Media 42
Circuit City Stores 42
Comcast 38
Western Wireless 38
Catalina Marketing 24
Home Depot 20
Outback Steakhouse 20
Chancellor Media 18
Total 331(cents)
- --------------------------------------------------------------------------------
TEN WORST CONTRIBUTORS
- --------------------------------------------------------------------------------
Cole National -34(cents)
Quorum Health Group ** 21
Total Renal Care Holdings 21
Sinclair Broadcast Group ** 20
Concentra Managed Care ** 18
General Nutrition 18
Republic Industries ** 17
Franklin Resources 17
Interim Services 16
Paging Network ** 16
- --------------------------------------------------------------------------------
Total -198(cents)
* Position added
** Position eliminated
*** Acquired by another company
Performance Comparison
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with a broad-based average or index. An index
return does not reflect expenses, which have been deducted from the fund's
return.
New America Growth Portfolio
- --------------------------------------------------------------------------------
As of 6/30/99
Lipper
New America S&P 500 Variable Annuity
Growth Stock Underlying Growth
Portfolio Index Funds Average
3/31/94 10,000 10,000 10,000
6/94 9,670 10,042 9,743
6/95 12,504 12,660 12,119
6/96 17,326 15,952 14,994
6/97 19,964 21,487 18,828
6/98 25,990 27,968 24,288
6/99 29,205 34,333 29,146
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
New America Growth Portfolio
Periods Ended 6/30/99
Since Inception
1 Year 3 Years 5 Years Inception Date
- --------------------------------------------------------------------------------
12.37% 19.01% 24.74% 22.65% 3/31/94
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Total returns do not include charges imposed by your insurance company's
separate account. If these were included, performance would have been lower.
Financial Highlights
T. Rowe Price New America Growth Portfolio
(Unaudited)
For a share outstanding throughout each period
--------------------------------------------------------------------
6 Months Year 3/31/94
Ended Ended Through
6/30/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
NET ASSET VALUE
Beginning of period $ 24.74 $ 21.35 $ 17.67 $ 15.23 $ 10.10 $ 10.00
Investment activities
Net investment
income (0.06) (0.08) -- 0.04 0.03 0.01
Net realized
and unrealized
gain (loss) 2.79 3.97 3.73 2.94 5.12 0.09
Total from
investment
activities 2.73 3.89 3.73 2.98 5.15 0.10
Distributions
Net investment income -- -- -- (0.04) (0.02) --
Net realized gain -- (0.50) (0.05) (0.50) -- --
Total distributions -- (0.50) (0.05) (0.54) (0.02) --
NET ASSET VALUE
End of period $ 27.47 $ 24.74 $ 21.35 $ 17.67 $ 15.23 $ 10.10
---------------------------------------------------------
Ratios/Supplemental Data
Total return(diamond) 11.03% 18.51% 21.12% 20.09% 51.10% 1.00%
Ratio of total expenses to
average net assets 0.85%! 0.85% 0.85% 0.85% 0.85 0.85%!
Ratio of net investment
income to average
net assets (0.45)%! (0.34)% 0.02% 0.18% 0.23% 0.15%!
Portfolio
turnover rate 28.7%! 46.0% 37.3% 27.2 54.5% 81.0%!
Net assets, end of period
(in thousands) $125,790 $118,989 $ 96,991 $ 60,241 $ 12,304 $ 2,028
(diamond) Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment
of all distributions.
! Annualized
The accompanying notes are an integral part of these financial statements.
Statement of Net Assets
T. Rowe Price New America Growth Portfolio
June 30, 1999 (Unaudited)
Shares Value
- --------------------------------------------------------------------------------
In thousands
COMMON STOCKS 98.3%
FINANCIAL SERVICES 14.6%
Bank and Trust 1.5%
Wells Fargo 45,000 $ 1,924
1,924
Insurance 1.7%
ACE Limited 30,500 862
MGIC Investment 25,000 1,215
2,077
Investment Services 4.8%
Franklin Resources 30,000 1,219
Goldman Sachs Group * 6,000 433
Morgan Stanley Dean Witter 23,500 2,409
Waddell & Reed Financial
(Class A) 18,000 494
Waddell & Reed Financial
(Class B) 57,000 1,539
6,094
Other Financial Services 6.6%
Associates First
Capital (Class A) 52,000 2,304
CIT Group (Class A) 63,500 1,834
Fannie Mae 22,000 1,504
Freddie Mac 46,000 2,668
8,310
Total Financial Services 18,405
CONSUMER SERVICES 35.6%
Retailing/General Merchandisers 4.4%
Costco Companies * 29,000 2,321
Kroger * 80,000 2,235
Safeway * 19,900 985
5,541
Retailing/Specialty Merchandisers 9.3%
Circuit City Stores 39,000 3,627
Cole National (Class A) * 58,000 460
CVS 14,000 711
General Nutrition * 21,200 494
Home Depot 40,000 2,578
Office Depot * 140,250 3,094
Williams-Sonoma * 20,000 696
11,660
Entertainment and Leisure 3.8%
Carnival (Class A) 26,000 $ 1,261
Extended Stay America * 110,000 1,320
Premier Parks * 58,000 2,131
4,712
Restaurants/Food Distribution 1.8%
Outback Steakhouse * 58,000 2,275
2,275
Personal Services 8.3%
Apollo Group (Class A) * 100,000 2,653
Avis Rent A Car * 58,000 1,689
Cendant * 157,500 3,229
ServiceMaster 69,000 1,294
Sylvan Learning Systems * 60,000 1,631
10,496
Communication Services 8.0%
MCI WorldCom * 38,000 3,269
Vodafone ADR 16,750 3,300
Voicestream Wireless * 59,900 1,705
Western Wireless 65,000 1,757
10,031
Total Consumer Services 44,715
BUSINESS SERVICES 47.5%
Health Care Services 3.5%
Cardinal Health 19,000 1,218
IMS Health 28,500 890
Omnicare 70,000 884
Total Renal Care Holdings * 87,500 1,362
4,354
Computer Services 11.9%
Acxiom * 73,000 1,823
Affiliated Computer
Services (Class A) * 57,500 2,911
BISYS Group * 40,000 2,341
Ceridian * 23,000 752
First Data 50,000 2,447
Galileo International 52,000 2,779
SunGard Data Systems 57,000 1,966
15,019
Environmental Services 3.9%
Republic Services (Class A) * 75,000 1,856
Waste Management 57,000 3,064
4,920
Other Business Services 10.3%
ADVO * 45,000 $ 934
Catalina Marketing * 27,500 2,530
Concord EFS * 13,800 584
Equifax 31,300 1,117
Gartner Group (Class A) * 48,800 1,000
Interim Services * 68,500 1,413
Metamor Worldwide * 62,500 1,500
Modis Professional Services * 115,000 1,581
NOVA * 54,700 1,368
Paychex 30,750 978
13,005
Energy Services 1.8%
Schlumberger 23,000 1,465
Smith International 18,000 782
2,247
Transportation Services 1.1%
Coach USA * 32,400 1,359
1,359
Media Services 15.0%
AT&T * 110,000 4,042
Chancellor Media * 57,500 3,168
Clear Channel
Communications * 33,562 2,314
Comcast (Class A Special) 65,000 2,498
Fox Entertainment Group
(Class A) * 69,000 1,859
Infinity Broadcasting (Class A) * 57,000 1,696
Outdoor Systems * 90,000 3,285
18,862
Total Business Services 59,766
Miscellaneous Common Stocks 0.6% 707
Total Common Stocks (Cost $81,256) 123,593
Short-Term Investments 1.3%
MONEY MARKET FUNDS 1.3%
Reserve Investment Fund,
5.05% # 1,664,441 $ 1,664
Total Short-Term Investments
(Cost $1,664) 1,664
Total Investments in Securities
99.6% of Net Assets (Cost $82,920) $ 125,257
Other Assets Less Liabilities 533
NET ASSETS $ 125,790
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ (266)
Accumulated net realized gain/loss -
net of distributions 7,997
Net unrealized gain (loss) 42,337
Paid-in-capital applicable to
4,579,715 shares of $0.0001 par
value capital stock outstanding;
1,000,000,000 shares of the
Corporation authorized 75,722
NET ASSETS $ 125,790
----------
NET ASSET VALUE PER SHARE $ 27.47
----------
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price New America Growth Portfolio
(Unaudited)
In thousands
6 Months
Ended
6/30/99
Investment Income
Income
Dividend $ 152
Interest 82
Total income 234
Expenses
Investment management and administrative 500
Net investment income (266)
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 6,590
Change in net unrealized gain or loss on securities 6,261
Net realized and unrealized gain (loss) 12,851
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 12,585
---------
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price New America Growth Portfolio
(Unaudited)
In thousands
6 Months Year
Ended Ended
6/30/99 12/31/98
Increase (Decrease) in Net Assets
Operations
Net investment income $ (266) $ (370)
Net realized gain (loss) 6,590 3,712
Change in net unrealized
gain or loss 6,261 13,748
Increase (decrease) in net
assets from operations 12,585 17,090
Distributions to shareholders
Net realized gain -- (2,354)
Capital share transactions*
Shares sold 11,262 32,866
Distributions reinvested -- 2,354
Shares redeemed (17,046) (27,958)
Increase (decrease) in net
assets from capital
share transactions (5,784) 7,262
Net Assets
Increase (decrease) during period 6,801 21,998
Beginning of period 118,989 96,991
End of period $ 125,790 $ 118,989
*Share information
Shares sold 445 1,429
Distributions reinvested -- 107
Shares redeemed (674) (1,270)
Increase (decrease) in
shares outstanding (229) 266
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price New America Growth Portfolio
June 30, 1999 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Series Fund, Inc. (the corporation) is registered
under the Investment Company Act of 1940. The New America Growth Portfolio
(the fund), a diversified, open-end management investment company, is one
of the portfolios established by the corporation and commenced operations
on March 31, 1994. The shares of the fund are currently being offered only
to separate accounts of certain insurance companies as an investment medium
for both variable annuity contracts and variable life insurance policies.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the
valuations are made. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Listed securities not traded on a
particular day and securities regularly traded in the over-the-counter
market are valued at the mean of the latest bid and asked prices. Other
equity securities are valued at a price within the limits of the latest bid
and asked prices deemed by the Board of Directors, or by persons delegated
by the Board, best to reflect fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the
officers of the fund, as authorized by the Board of Directors.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Dividend income and
distributions to shareholders are recorded by the fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with federal income tax regulations and may differ from those determined in
accordance with generally accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $16,746,000 and $24,106,000, respectively, for the
six months ended June 30, 1999.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income.
At June 30, 1999, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$82,920,000. Net unrealized gain aggregated $42,337,000 at period-end, of
which $45,484,000 related to appreciated investments and $3,147,000 to
depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management and administrative agreement between the fund and
the manager provides for an all-inclusive annual fee, of which $70,000 was
payable at June 30, 1999. The fee, computed daily and paid monthly, is
equal to 0.85% of the fund's average daily net assets. Pursuant to the
agreement, investment management, shareholder servicing, transfer agency,
accounting, and custody services are provided to the fund, and interest,
taxes, brokerage commissions, and extraordinary expenses are paid directly
by the fund.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available
to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the six months ended
June 30, 1999, totaled $82,000 and are reflected as interest income in the
accompanying Statement of Operations.
Invest With Confidence(registered trademark)
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for dis-
tribution only to those who have
received a copy of the portfolio's
prospectus.
T. Rowe Price Investment Services, Inc., Distributor
TRP652 (6/99)
K15-055 6/30/99
